Calstrs suspends home loan program for teachers

The California State Teachers’ Retirement System announced that it will stop making new home loans for members after Friday while it looks for a new company to administer the program and service new loans.

It said that members seeking a residential mortgage through its CalSTRS Home Loan Program must submit their applications to participating lenders and have interest rates locked in by Friday.

Bank of America has been the program’s administrator and master servicer but it is seeking a lender for its correspondent lending business. “They do not want to originate new loans while they are seeking a buyer because they would have to service them,” says Calstrs spokesman Ricardo Duran. BofA will continue to service existing loans made through the program even after a new company is hired to run it.

Duran said members who have already started the loan process were warned that they needed to act quickly. He said BofA told the teachers’ pension fund that it might pull out of the program earlier this month but didn’t confirm it until last week.

“This is a disappointing outgrowth of the many problems confronting the housing and mortgage industries, however CalSTRS is committed to the member home loan program and will resume new loan activity as soon as a new partnership can be established with an administration servicing and compliance agent,” said CalSTRS Chief Investment Officer Christopher J. Ailman said in a press release.

Duran estimates that it could take six months to have a new administrator in place and resume making loans.

The CalSTRS Home Loan Program began in 1984 and has originated more than 43,000 home loans totaling $5.9 billion for California teachers and administrators. The program now manages a $388 million portfolio.